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Nova LifeStyle Reports Fourth Quarter and Full Year 2015 Financial Results

Company to host conference call at 11:00 am ET on Monday March 28, 2016

LOS ANGELES, March 28, 2016 (GLOBE NEWSWIRE) -- Nova LifeStyle, Inc. (NASDAQ:NVFY), a U.S. based fast-growing, innovative designer, manufacturer and distributor of modern LifeStyle furniture, today announced financial results for the fourth quarter and twelve months ended December 31, 2015.

/EIN News/ -- Fourth Quarter and Full Year 2015 Financial Highlights:

  • For the twelve-month period ended December 31, 2015, Net Sales were $108.8 million, an increase of 10.3% compared to the prior year period.  Sales growth was driven primarily by a 11% increase in sales volume along with a 2% decrease in average selling prices.
  • Fourth quarter Net Sales were $28.6 million compared to $29.0 in the prior year period.
  • For the full year 2015, gross profit was $18.4 million, a decrease of 5.2% versus the prior year period.  Gross profit for the fourth quarter was $4.8 million, a decrease of 8.0% from the prior year period.      
  • Fourth quarter Gross Margin was 15%, compared to 23% in the prior year period while full year 2015 Gross Margin was 16.9%, compared to 19.6% in the prior year period.  Fourth quarter sales mix was more heavily weighted to lower price products which also yield lower margins for the Company.
  • Gross Profit and Gross Margin both also declined due to increased costs associated with products purchased from third parties.  In addition, Nova LifeStyle reduced selling prices on certain items sold to a limited number of large accounts during 2015, which the Company believes will ultimately benefit its growth in the future while allowing it to sell additional product into core accounts while eventually gaining margin expansion as it reaches critical mass with those customers.
  • Net Income was $0.7 million, or $0.03 per diluted share based on 22.8 million shares outstanding in the fourth quarter of 2015, compared to net income of $1.8 million or $0.09 per diluted share based on 20.4 million shares outstanding in the prior year period. 
  • For the full year 2015, Net Income was $2.2 million, or $0.10 per diluted share based on 22.8 million shares outstanding, compared to net income of $8.5 million or $0.42 per diluted share based on 20.4 million shares outstanding in the prior year period.

Management Commentary
Jeffrey Wong, Chief Executive Officer of Nova LifeStyle, stated, "Our 2015 results were highlighted by top line growth of 10% year over year, largely driven by our continued expansion in North America and China.  North American sales increased 17% during the period, showing that our expanded marketing efforts to the U.S. and Canadian markets are bearing fruit.  This also compares very favorably with North American industry growth of 3.8% last year.1  In China we grew our sales 11% as our relationship with IKEA continues to expand.  In addition, we expect recently-announced partnerships, such as Vanke, one of the leading real estate developers in China, to help drive continued sales growth in 2016 and beyond.  Although European sales were relatively flat year over year we continue to believe that customers in those markets have an appetite for our new modern home furnishing solutions that encapsulate a changing contemporary lifestyle.  As those economies begin to rebound we expect to see increased sales activity.”

Mr. Wong continued, “Last quarter we noted that our cost of goods was elevated due to increased seasonal orders fulfilled using third party manufacturers and this dynamic persisted in the fourth quarter.  We feel it is vital to make sure we provide our customers with the highest quality products in a timely manner.  In order to maintain this level of service, we are sometimes forced to absorb higher third party costs.  Over the long run we are confident that this strategy cements our relationship with our clients and is the right course of action.  We are working to expand our supplier base which we feel will lead to more stability in our supply chain moving forward.  Additionally, as we pursue large, “national account sized” customers, we may choose to offer some flexibility on price in order to gain new customers.  During the fourth quarter we made a small number of such concessions which we believe will benefit our business in the long run.”

Ms. Tawny Lam, President of Nova LifeStyle, stated, “2015 featured a number of highlights for Nova LifeStyle.  We participated in several of the leading industry trade shows, such as the Las Vegas Market events along with the High Point Market.  We continued to expand our online commerce presence and announced new partnerships with leading firms such as Vanke and I-Kongjian.  An additional highlight of the year was that Nova LifeStyle won the Outstanding Import & Export Enterprise Award from The Hong Kong Chinese Importers’ & Exporters’ Association (“HKCIEA” or the “Association”) on September 14, 2015 following the Company’s participation at The 36th Edition of the China International Furniture Fair (Shanghai), from September 8-12, 2015.  In closing, I would like to thank all of our shareholders for their trust in our company and I would also like to thank all of our employees for their hard work and dedication.”

1 https://ycharts.com/indicators/us_furniture_and_home_furnishings_store_sales

Operational Overview

Product Category
Nova LifeStyle’s largest selling product categories in the twelve months ended December 31, 2015 and 2014 were sofas, cabinets and dining tables, which accounted for approximately 30%, 15% and 16% of sales, respectively, for the twelve months ended December 31, 2015, versus 34%,16% and 16% of sales in the prior year period.

In order to drive growth, the Company is focused on the adoption of new image standards along with continued expansion of  its product lines.  The Company intends to enrich its product lines to include a bedroom series, which would include beds, bed side tables, mattresses (which could be imported or purchased in China) and bedding sets including bed sheets, pillowcases, quilt covers, and other items (which can be purchased within China).

Geographic Breakdown

North America
Sales to North America were $75.2 million in the twelve months ended December 31, 2015, an increase of 17% from $64.4 million in the same period of 2014, driven by a continuation of our increased marketing efforts in the U.S. markets.  As a percentage of total revenue, North American sales remain the largest for Nova LifeStyle at 69%.

China
In China, overall sales increased by 11% to $19.0 million in the twelve months ended December 31, 2015, as compared to $17.0 million in the same period of 2014, driven by increased sales from our subsidiary, Ding Nuo, to IKEA.

Europe  
Sales to Europe were $10.6 million in the twelve months ended December 31, 2015, a decrease of 7% from $11.4 million in the same period of 2014 as a result of the continued softness in European economies.

Geographical distribution of sales is set out as follows:

(US$ in millions) For twelve months ended December 31,   For three months ended December 31,  
  2015 2014   2015 2014  
  Sales % of  Total Sales % of  Total   Sales % of  Total Sales % of  Total  
China* $   19.0     17 % $   17.0     17 %   $   5.5     19 % $   4.8     17 %  
North America   75.2     69 %   64.4     65 %     18.0     63 %   120.2     70 %  
Asia**   2.7     2 %   4.4     5 %     0.6     2 %   0.3     1 %  
Europe   10.6     10 %   11.4     12 %     3.7     13 %   3.2     11 %  
Australia   0.5     1 %   0.7     1 %     0.1     1 %   0.4     1 %  
Hong Kong   0.7     1 %   0.7     1 %     0.6     2 %   0.0     0 %  
Other countries   0.3     0 %   0.1     0 %     0.2     1 %   -   NA  
  $   108.9     100 % $   98.7     100 %   $   28.6     100 % $   25.9     100 %  
* excluding Hong Kong
** excluding China
 

Notable Achievements and Highlights During 2015

  • January 2015: Presented at the Winter 2015 Las Vegas Market trade show.  The Las Vegas Market is an international furnishings showcase that combines style, inspiration and productivity in an unrivaled, world-class destination.
     
  • April 2015: Announced the successful development of a new, health-oriented, product line called Smart Health Furniture, that offers the ability to monitor, record and deliver user data to key medical care providers.
     
  • June 2015: Launched First-of-Its-Kind "Last Mile" Furniture Delivery and Installation Service called ezHome.
     
  • August 2015: Presented at the Summer 2015 Las Vegas Market trade show.  The Las Vegas Market is an international furnishings showcase that combines style, inspiration and productivity in an unrivaled, world-class destination.
     
  • September 2015: Won the Outstanding Import & Export Enterprise Award from The Hong Kong Chinese Importers’ & Exporters’ Association (“HKCIEA” or the “Association”) on September 14, 2015 following the Company’s participation at The 36th Edition of the China International Furniture Fair (Shanghai), from September 8-12, 2015.
     
  • October 2015: Participated in the High Point Market trade show in High Point, NC.  The High Point Market is the largest furnishings industry trade show in the world, bringing more than 75,000 people every six months.
     
  • December 2015: Signed a strategic alliance agreement with (China) Shanxi Wanqing Senior Care Service, Group (“Shanxi Wanqing”), a senior care service, senior care home and hotel development company, to operate as its exclusive supplier for furniture design and manufacturing. 


Balance Sheet and Cash Flow Highlights

  • Cash and cash equivalents were $1.0 million at December 31, 2015, as compared to $1.2 million as of December 31, 2014. 
  • Working capital at December 31, 2015 was $48.6 million, as compared to $34.5 million at December 31, 2014.

The following is a summary of cash provided by or used in each of the indicated types of activities during the twelve months ended December 31, 2015 and 2014:

             
    2015     2014  
Cash (used in) provided by:            
Operating activities   $ (4,229,308   $ (6,455,730
Investing activities     (2,473,664 )     (4,137,725 )
Financing activities     6,452,072       9,510,373  
                 

Net cash used in operating activities was $4.2 million in the twelve months ended December 30, 2015, a decrease of cash outflow of $2.3 million from $6.5 million of cash used in operating activities in the same period of 2014.

   
Conference Call Details  
   
Date / Time: Monday, March 28, 2016 at 11:00 a.m. ET 
   
Participant Dial-In Numbers   
(United States): 877-704-4209
(International): 201-689-8024
(China): +86 40-0120-2840
   

Webcast
To listen to the live webcast, please go to www.NovaLifeStyle.com and click on the conference call link, or click: Nova Lifestyle Fourth Quarter and Full Year 2015 Webcast.  This webcast will be archived and accessible through the Company’s website for approximately 30 days following the call.

About Nova LifeStyle
Nova LifeStyle, Inc., a NASDAQ Global Markets Exchange listed company headquartered in California, is a fast growing, innovative designer, manufacturer and distributor of modern LifeStyle furniture; primarily sofas, dining rooms, cabinets, office furniture and related components, bedrooms, and various accessories in matching collections. Nova's products are made in the US, Europe, and Asia and include LifeStyle brands such as Diamond Sofa, Colorful World, Giorgio Mobili, Nova QwiK, and Bright Swallow International. Nova's products feature urban contemporary styles that integrate comfort and functionality incorporating upscale luxury designs appealing to LifeStyle-conscious middle and upper middle-income consumers in the U.S., China, Europe, and elsewhere in the world. To learn more about Nova LifeStyle, Inc., please visit our website at www.NovaLifeStyle.com or download the NVFY IRapp from the investor page.

Safe Harbor Statement
All statements in this press release that are not historical are forward-looking statements made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. There can be no assurance that actual results will not differ from the company's expectations. You are cautioned not to place undue reliance on any forward-looking statements in this press release as they reflect Nova's current expectations with respect to future events and are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated. Potential risks and uncertainties include, but are not limited to, the risks described in Nova's filings with the Securities and Exchange Commission.

     
NOVA LIFESTYLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE TWELVE AND THREE MONTHS ENDED DECEMBER 31, 2015 AND 2014
               
  Years Ended December 31   Three Months Ended December 31
     2015        2014        2015        2014  
  (Audited)   (Audited)   (Unaudited)   (Unaudited)
               
Net Sales  $ 108,820,112     $ 98,711,275     $ 28,617,544     $ 29,002,293  
               
Cost of Sales   90,430,560       79,319,418       23,763,946       23,726,425  
               
Gross Profit   18,389,552       19,391,857       4,853,598       5,275,868  
               
Operating Expenses              
Selling expenses   6,161,294       5,477,132       2,273,585       2,678,803  
General and administrative expenses   8,678,402       7,823,767       1,883,117       2,024,572  
Goodwill impairment --     808,518     --   --
Loss on disposal fixed assets --     31,727     --     2,764  
               
Total Operating Expenses   14,839,696       14,141,144       4,156,702       4,706,139  
               
Income From Operations   3,549,856       5,250,713       696,896       569,729  
               
Other Income (Expenses)              
Non-operating income, net   325,701       241,189       220,618       76,909  
Foreign exchange transaction gain   93,797       48,183       17,820       48,183  
Change in fair value of warrant liability   (767,096 )     4,194,847     --     1,353,670  
Interest expense   (387,477 )     (158,336 )     (106,320 )     (57,419 )
Financial expense   (62,953 )     (41,212 )     (17,198 )     15,111  
               
Total Other Income (Expenses), Net   (798,028 )     4,284,671       114,920       1,436,454  
               
Income Before Income Tax   2,751,828       9,535,384       811,816       2,006,183  
               
Income Tax Expense   551,586       980,736       127,313       228,425  
               
Net Income   2,200,242       8,554,648       684,503       1,777,758  
               
Other Comprehensive Income              
Foreign currency translation   (1,004,633 )     (27,843 )     (349,463 )     111,893  
               
Comprehensive Income  $ 1,195,609     $ 8,526,805     $ 335,040     $ 1,889,651  
               
Basic weighted average shares outstanding   22,825,652       20,381,934       22,594,017       20,257,955  
Diluted weighted average shares outstanding   22,825,652       20,470,258       22,594,017       20,372,292  
               
Basic net earnings per share  $ 0.10     $ 0.42     $ 0.03     $ 0.09  
Diluted net earnings per share  $ 0.10     $ 0.42     $ 0.03     $ 0.09  
                               


   
NOVA LIFESTYLE, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED BALANCE SHEETS  
DECEMBER 31, 2015 AND 2014  
         
    2015       2014    
         
Assets        
         
Current Assets        
Cash and cash equivalents $ 988,029     $ 1,244,308    
Accounts receivable, net   50,451,665       42,971,510    
Advance to suppliers   7,958,870       8,104,312    
Inventories   5,254,029       3,612,868    
Prepaid expenses and other receivables   1,180,452       641,208    
Deferred tax asset --     118,866    
         
Total Current Assets    65,833,045       56,693,072    
         
Noncurrent Assets        
Heritage and cultural assets   124,868       132,513    
Plant, property and equipment, net   15,201,395       14,377,909    
Construction in progress --     1,378,860    
Lease deposit   94,235       96,096    
Deposits for equipment and factory construction   143,758       1,264,551    
Goodwill   218,606       218,606    
Intangible assets, net   8,062,649       6,493,726    
Deferred tax asset   69,451     --  
         
Total Noncurrent Assets   23,914,962       23,962,261    
         
Total Assets  $ 89,748,007     $ 80,655,333    
         
         
Liabilities and Stockholders' Equity        
         
Current Liabilities        
Accounts payable $ 9,822,857     $ 10,454,485    
Line of credit   4,604,560       7,592,879    
Advance from customers   187,359       123,673    
Accrued liabilities and other payables   2,584,622       2,470,284    
Warrant derivative liability --     1,465,019    
Taxes payable   5,773       61,769    
         
Total Current Liabilities   17,205,171       22,168,109    
         
Noncurrent Liabilities        
Line of credit   5,659,357       --    
Deferred rent payable   89,904       85,077    
Deferred tax liability --     12,199    
Income tax payable   6,801,893       6,607,739    
         
Total Noncurrent Liabilities   12,551,154       6,705,015    
         
Total Liabilities   29,756,325       28,873,124    
         
Contingencies and Commitments        
         
Stockholders' Equity        
Common stock, $0.001 par value; 75,000,000 shares authorized,        
24,254,160 and 20,897,316 shares issued and outstanding   24,254       20,897    
as of December 31, 2015 and 2014, respectively    
Additional paid-in capital   31,761,983       24,751,476    
Statutory reserves   6,241       6,241    
Accumulated other comprehensive income   1,570,534       2,575,167    
Retained earnings   26,628,670       24,428,428    
         
Total Stockholders' Equity   59,991,682       51,782,209    
         
Total Liabilities and Stockholders' Equity $ 89,748,007     $ 80,655,333    
         


NOVA LIFESTYLE, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014  
(AUDITED)  
         
    2015       2014    
         
Cash Flows From Operating Activities        
Net Income $ 2,200,242     $ 8,554,648    
Adjustments to reconcile net income to net cash        
 (used in) operating activities:        
Depreciation and amortization   1,860,598       1,700,758    
Changes in deferred tax   35,127       180,720    
Stock compensation expense   1,377,328       663,317    
Warrants expense --     76,629    
Change in fair value of warrant liability   767,096       (4,194,847 )  
Bad debt expenses   669,596       119,121    
Goodwill impairment --     808,518    
Loss on disposal of fixed assets --     31,727    
Changes in operating assets and liabilities:        
Accounts receivable   (8,659,276 )     (15,066,077 )  
Advance to suppliers   137,262       (4,572,043 )  
Inventories   (1,798,077 )     (266,023 )  
Other current assets   (922,702 )     131,343    
Accounts payable   (382,438 )     3,508,782    
Advance from customers   68,975       80,602    
Accrued expenses and other payables   (5,036 )     998,188    
Deferred rent payable   10,149       11,149    
Taxes payable   411,848       777,758    
         
Net Cash Used in Operating Activities   (4,229,308 )     (6,455,730 )  
         
Cash Flows From Investing Activities        
Deposit on plant construction and equipment   (80,604 )     (1,252,811 )  
Payment for land compensation fee and occupancy tax   (951,003 )   --  
Purchase of property and equipment   (396,049 )     (1,617,961 )  
Cash received from disposition of fixed assets --     11,998    
Construction in progress   (1,046,008 )     (1,278,951 )  
         
Net Cash Used in Investing Activities   (2,473,664 )     (4,137,725 )  
         
Cash Flows From Financing Activities        
Proceeds from line of credit and bank loan   38,908,577       30,612,098    
Repayment to line of credit and bank loan   (36,101,507 )     (30,439,566 )  
Proceeds from subscription receivable --     750,000    
Cash received from warrants exercised --     468,841    
Proceeds from equity financing, net of expenses of $355,000   3,645,002       8,119,000    
         
Net Cash Provided by Financing Activities $ 6,452,072     $ 9,510,373    
         
         
NOVA LIFESTYLE, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)  
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014  
(AUDITED)  
         
     
    2015       2014    
         
Effect of Exchange Rate Changes on        
Cash and Cash Equivalents $ (5,379 )   $ 4,052    
         
Net decrease in cash and cash equivalents   (256,279 )     (1,079,030 )  
         
Cash and cash equivalents, beginning of period   1,244,308       2,323,338    
         
Cash and cash equivalents, ending of period $ 988,029     $ 1,244,308    
         
Supplemental Disclosure of Cash Flow Information  
         
Cash paid during the year for:        
Income tax payments $ 131,292     $ 21,493    
Interest expense $ 388,325     $ 312,322    
         
Supplemental Disclosure of Non-Cash Financing Activities  
         
Construction in progress and deposits for equipment and factory construction transfer to fixed assets  $ 2,406,995     $ 797,665    
Construction in progress transfer to intangible assets $ 1,208,200     $  --  
Issuance of common stock in exchange of surrender and termination of warrants $ 2,232,115     $  --  
         
Company Contact:
Investor Relations:
The Equity Group Inc.
In U.S.
Adam Prior, Senior Vice President
+1 (212) 836-9606
aprior@equityny.com

In China
Katherine Yao, Senior Associate
+86-10-6587-6435
kyao@equityny.com

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